Lease vs Loan Comparison Calculator

Same car, two financing paths, very different totals

A $40,000 sedan financed over 60 months at 6.9% costs roughly $47,200 in total. Lease the same car for 36 months at 4.5% with a 50% residual and buy it out, and the total comes to about $44,800. That is a $2,400 gap - or about $67/month. The winner depends on rates, terms and whether you plan to keep the car.

How to compare lease and loan - step by step

Vehicle price ($) - the negotiated price before taxes and fees. Used as the starting point for both options.
Sales tax (%) - your state/local rate. Applied to lease payments and loan amount.
Down payment (%) - the same percentage for both options ensures a fair comparison.
Lease term and rate - typical lease: 36 months, 3-6% annual rate (or money factor x 2400).
Residual value (%) - the buyout price at lease end. Higher residual means lower monthly payment.
Loan term and rate - typical auto loan: 48-72 months, 5-9% APR.
Origination fee (%) - one-time loan processing fee (0-2%).
Read the verdict - the calculator shows which option has a lower total cost and by how much.

Lease vs loan at different price points

Assumptions: 10% down, lease 36 months at 4.5% with 50% residual, loan 60 months at 6.9%, 1% origination fee, 7% tax.

Vehicle price	Lease payment	Loan payment	Total cost (lease)	Total cost (loan)	Cheaper by
$25,000	$438/mo	$476/mo	$29,380	$31,220	Lease $1,840
$40,000	$700/mo	$762/mo	$47,000	$49,960	Lease $2,960
$55,000	$963/mo	$1,048/mo	$64,600	$68,680	Lease $4,080
$75,000	$1,314/mo	$1,429/mo	$88,100	$93,650	Lease $5,550

At these rates, leasing wins in all scenarios because the lease rate (4.5%) is lower than the loan rate (6.9%). When the loan rate drops below the lease rate, the result flips.

When leasing wins vs when a loan wins

Scenario	Better option	Why
Lease rate lower than loan rate	Lease	Lower financing cost + shorter commitment period
Planning to keep the car 5+ years	Loan	You own the car after payoff - no more payments. Lease requires a new deal or buyout.
Switching cars every 2-3 years	Lease	Turn in and get a new car with no resale hassle
High annual mileage (20k+ miles)	Loan	Leases penalize excess mileage ($0.15-0.25 per extra mile)
Business use / tax deduction	Lease	Lease payments are fully deductible as a business expense (IRS rules)
Credit score below 680	Loan	Lease companies typically require higher credit scores. Subprime auto loans are more accessible.

Practical examples

Example 1: $35,000 SUV, 10% down, lease 36 mo at 3.9%, 55% residual vs loan 60 mo at 7.2%
Lease payment: $504/mo, total: $37,590 | Loan payment: $624/mo, total: $40,940 | Lease saves $3,350

Example 2: $28,000 sedan, 15% down, lease 24 mo at 5.5%, 60% residual vs loan 48 mo at 5.5%
Lease payment: $533/mo, total: $29,450 | Loan payment: $552/mo, total: $30,700 | Lease saves $1,250

Example 3: $50,000 truck, 20% down, lease 48 mo at 6.0%, 40% residual vs loan 48 mo at 5.0%
Lease payment: $728/mo, total: $54,960 | Loan payment: $921/mo, total: $54,210 | Loan saves $750

Example 4: $22,000 compact, 0% down, lease 36 mo at 4.0%, 50% residual vs loan 60 mo at 8.0%
Lease payment: $430/mo, total: $26,480 | Loan payment: $446/mo, total: $26,780 | About equal (Lease saves $300)

Example 5: $65,000 luxury, 10% down, lease 36 mo at 3.5%, 55% residual vs loan 72 mo at 6.5%
Lease payment: $987/mo, total: $71,420 | Loan payment: $990/mo, total: $77,780 | Lease saves $6,360

FAQ

Does this calculator assume I buy the car at lease end?

Yes. The total lease cost includes the residual buyout so both options end with you owning the car. Without the buyout, the lease total would be lower - but you would not own anything. This makes the comparison fair: same car, same outcome, different financing paths.

What is a money factor and how do I convert it?

A money factor is the lease equivalent of an interest rate. Dealers quote it as a small decimal like 0.00188. Multiply by 2,400 to get the approximate annual rate: 0.00188 x 2,400 = 4.5%. A lower money factor means a cheaper lease. Ask the dealer for the money factor - they are required to disclose it.

Why does the lease often look cheaper?

Two reasons: (1) You only finance the depreciation (price minus residual), not the full price. (2) Manufacturer-subsidized leases often have lower money factors than bank loan rates. The catch: if you do not buy the car at lease end, you start over with nothing. A loan builds equity with every payment.

What about mileage limits on leases?

Most leases allow 10,000-15,000 miles/year. Excess mileage costs $0.15-0.25 per mile. If you drive 18,000 miles/year on a 12,000-mile lease for 36 months, the penalty is (18,000 - 12,000) x 36/12 x $0.20 = $3,600 at turn-in. That can wipe out any lease savings. This calculator does not include mileage penalties - factor them in separately if you drive more than the limit.

Is the residual value negotiable?

Usually no. The residual is set by the leasing company based on the car's projected market value. A higher residual means a lower monthly payment but a higher buyout price at lease end. Cars that hold their value well (Toyota, Honda, Lexus) typically have higher residuals - and lower lease payments as a result.

How does tax work differently for leases and loans?

It depends on the state. In most states, sales tax on a loan is paid upfront on the full vehicle price. On a lease, tax is paid monthly on just the lease payment - a smaller amount spread over time. Some states (Texas, Illinois, New York) tax the full lease price upfront. This calculator applies the same tax rate to both for simplicity.

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Lease vs Loan Comparison Calculator - Which Costs Less

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